Forecast: More Advisor Deals Coming

The number of mergers and acquisitions of financial advisors is set to increase substantially in 2014 and beyond, according to research released by Tiburon Strategic Advisors.

Financial advisors are aging -- specifically independent advisors, who were traditionally younger than employee advisors, says Tiburon managing partner Chip Roame. The number of new advisors is limited, so the ability to buy these books is valuable specifically as tuck-ins to larger firms.

One of the larger firms that simply saw the trend before everyone else, says Roame, is National Financial Partners. The big IBD has been scooping up advisors for a total of 153 advisor acquisitions over the last dozen or so years. Behind NFP are more recently founded Focus Financial Partners, with 23 acquisitions, and HighTower Advisors with 21. (Update: HighTower says that, including tuck-in deals, it has actually made 41 acquisitions.)

Tiburon's research, released late last week, predicts that these new financial advisor aggregators are likely to succeed, despite a drop in dealmaking last year. The trend is going to pick up further and faster, says Roame.

Tiburon notes that roll-up firms actually dropped in 2013 from the leading type of advisor buyer, making just 39% of the acquisitions -- down from 53% of the purchases in 2012. Instead, other RIAs actually accounted for 50% of the buyers this year, up from 22% in 2012.

Tiburon also predicts that so-called strategic buyers, such as CPA firms and banks, will increase their M&A activity with financial advisors -- and that independent broker-dealers and custodians will continue to treat the succession challenge as a crisis or an opportunity (or perhaps both).

It takes years to appropriately plan for a succession, says Roame. Firms that think through succession planning also run themselves better in the interim.